Japan's Car Makers: Bargains or Bust?
Disclaimer: This is how I view these stocks based on my personal preferences and risk appetite. You might disagree. I'm sharing it for informational and educational purposes. I already own Honda shares.
Japan's car manufacturers are being hit hard at the moment (August 2025) with high tariffs and low market values. Does that mean they're bargains? Let's investigate.
- Nissan (7201)
- Toyota (7203)
- Mitsubishi Motors (7211)
- Mazda (7261)
- Honda (7267)
- Suzuki (7269)
- Subaru (7270)
Dividend Yield & Non-Japan Revenue
Given Nissan's problems it's not surprising they're not paying a dividend. For me, that takes them out of consideration.
The remainder all have healthy dividends and most of the revenue from outside Japan, which reassures me, however Subaru in particular has most of its revenue in the US (around 73%) which adds uncertainty in the current environment.
Good Value?
Now we see more variety – there are market valuations at both the low and high end of the company historical ranges. Clearly Mazda is at rock bottom for both historic PBR and EV/EBITDA (and PSR too, not shown here). Suzuki and Toyota are also candidates, as long as we can find evidence of quality…
High Quality?
Now it's Suzuki and Subaru who top the list when we look at both ROIC and ROE. Mazda are sadly languishing so maybe the low valuation is justified after all. For the bigger picture let's move on and combine valuation and quality into single "bang for the buck" metrics.
Bang for the Buck
Group Comparison
Historic Comparison
Wow, Mazda is the clear winner looking across the group, and still strong compared to its historic range. But so are several others. Is it really the best of the group, or does its negative profit forecast for 2025 mean all this will change very soon. I think so. From profitable to making a loss really throws in some uncertainty – not for the faint-hearted.
Meanwhile Suzuki also shines historically, even if it's just average within the group on a bang-for-buck basis. At least its revenue forecast is stable, probably due to its tiny exposure to the US market (mostly Japan and Asia).
Conclusion
After all that, my personal decision is to stand back and let this opportunity pass. As my personal strategy is good value + high quality with low risk (a long shot, I know!), Mazda looks cheap but doesn't feel low risk enough for me. My younger self would've probably taken a chance on it as a deep-value turnaround play, but not my current self.
On the other hand Suzuki has the right ingredients – superior ROE and ROIC (and healthy margins too). But is it a bargain? The share price is not far from all-time highs and valuation metrics are close to the median for the past few years, so not enough value for me.
There's also the uncertainty of lower-price Chinese electric cars making headlines and shaking up the industry. I sincerely hope the strong reputation of Japanese car manufacturers helps them defend their market share, but it's a battle I'll be watching from the sidelines.
Notes
I use the Japanese version of Trading View (no affiliation) for my analysis, which for Japanese stocks seems to have more data than the English version for some reason.
I'm not recommending you rush out and buy the shares mentioned here. I'm not a financial advisor and this is not investment advice. Please do your own research.